Glossary

Administration Order

An order made in a county court to arrange and administer the payment of debts by an individual;

or an order made by a court in respect of a company that appoints an administrator to take control of the company. A company can also be put into administration if a floating charge holder, or the directors or the company itself file the requisite notice at court.

Administrative Receiver

An IP appointed by the holder of a debenture that is secured by a floating charge that covers the whole or substantially the whole of the company's assets. The IP's task is to realise those assets on behalf of the debenture holder.

Administrative Receivership

The process where an insolvency practitioner is appointed by a debenture holder (lender) to realise a company's assets and pay preferential creditors and the debenture holder's debt. The right of a debenture holder to appoint an administrative receiver has been restricted by the Enterprise Act 2002

Administrator

An IP appointed by the court under an administration order or by a floating charge holder or by the company or its directors filing the requisite notice at court.

Annulment

Cancellation.

Assets

Anything that belongs to the debtor that may be used to pay his/her debts.

Bankruptcy restrictions order or undertaking

An order made in a county court to arrange and administer the payment of debts by an individual;

or an order made by a court in respect of a company that appoints an administrator to take control of the company. A company can also be put into administration if a floating charge holder, or the directors or the company itself file the requisite notice at court.

Charge

Security interest taken over property by a creditor to protect against non-payment of a debt (such as a mortgage).

Company Directors Disqualification Act 1986

An Act of Parliament about the disqualification of directors.

Compulsory liquidation

Winding up of a company after a petition to the court, usually by a creditor.

Contributory

Every person liable to contribute to the assets of a company if it is wound up. In most cases this means shareholders who have not paid for their shares in full.

Creditor

Someone owed money by a bankrupt or company.

Debenture

A document in writing, usually under seal, issued as evidence of a debt or the granting of security for a loan of a fixed sum at interest (or both). The term is often used in relation to loans (usually from banks) secured by charges, including floating charges, over companies' assets.

Director

A person who conducts the affairs of a company.

Disqualification

A procedure whereby a person has a court order made against them or gives an undertaking to the Secretary of State which makes it an offence for that person to be involved in the management or directorship of a company for the period specified in the order (unless leave has been granted by the court).

Dividend

Any sum distributed to unsecured creditors in an insolvency.

Fixed Charge

A charge held over specific assets. The debtor cannot sell the assets without the consent of the secured creditor or repaying the amount secured by the charge.

Floating Charge

A charge held over general assets of a company. The assets may change (such as stock) and the company can use the assets without the consent of the secured creditor until the charge "crystallises" (becomes fixed). Crystallisation occurs on the appointment of an administrative receiver, on the presentation of a winding-up petition or as otherwise provided for in the document creating the charge.

Guarantee

An agreement to pay a debt owed by a third party. It must be evidenced in writing for it to be enforceable.

Insolvency Practitioner

An authorised person who specialises in insolvency, usually an accountant or solicitor. They are authorised either by the Secretary of State or by one of a number of recognised professional bodies.

Liquidation (winding up)

Applies to companies or partnerships. It involves the realisation and distribution of the assets and usually the closing down of the business. There are three types of liquidation - compulsory, creditors' voluntary and members' voluntary.

Liquidator

The Official Receiver or an insolvency practitioner appointed to administer the liquidation of a company or partnership.

Meeting of Creditors (purpose of)

This is a meeting arranged in connection with an insolvency proceeding, at which any acknowledged creditor of an insolvent individual or company is entitled to attend.

The normal purpose of a creditors' meeting is to inform the creditors of the financial position of the insolvent individual or company, and report on the likely amount that can be realised by disposing of any assets. Such funds will be used to pay off secured creditors, preferred creditors and unsecured creditors in that order.

Member (of a company)

A person who has agreed to be, and is registered as, a member, such as a shareholder of a limited company.

Nominee

An IP who carries out the preparatory work for a voluntary arrangement, before its implementation.

Officer (of a company)

A director, manager or secretary of a company.

Official Receiver

An officer of the court and civil servant employed by The Insolvency Service, who deals with bankruptcies and compulsory company liquidations.

Person

An individual or corporation.

Petition

A formal application made to a court.

Preferential Creditor

A creditor who is entitled to receive certain payments in priority to floating charge holders and other unsecured creditors. These creditors include occupational pension schemes and employees.

Proof of Debt

A statutory form completed by a creditor in a compulsory liquidation to state how much is claimed. The form is supplied by the Liquidator.

Proof of Debt Form

The document submitted in an insolvency to establish a creditor's claim. It may be informal (by e.g. letter) or in the prescribed statutory form.

Provisional liquidator

OR/IP appointed to preserve a company's assets pending the hearing of a winding up petition.

Proxy

Instead of attending a meeting, a person can appoint someone to go and vote in their place - a 'proxy'.

Proxy Form

Form that must be completed if a creditor wishes someone else to represent him or her at a creditors' meeting and vote on his or her behalf.

Public Examination

When a company is being wound up or in bankruptcy proceedings, the Official Receiver may at any time apply to the court to question the company's director(s) or any other person who has taken part in the promotion, formation or management of the company or the bankrupt.

Realise

Realising an asset means selling it or disposing of it to raise money, for example to sell an insolvent's assets and obtain the proceeds.

Receiver

The commonly used name for an administrative receiver. The term can also mean a person appointed by the court or with the power to receive the rents and profits of property. Receivers who are not administrative receivers do not need to be insolvency practitioners.

Receivership

A company in administrative receivership is often said to be "in receivership.

Rescission

A procedure that cancels a winding-up order.

Release

The process by which the Official Receiver or an insolvency practitioner is discharged from the liabilities of office as trustee/liquidator or administrator.

Secretary of State

The Secretary of State for the Department of Trade and Industry.

Secured Creditor

A creditor who holds security, such as a mortgage, over a person's assets for money owed.

Shadow Director

A person who, without being formally appointed, gives instructions on which the directors of a company are accustomed to act.

Statement of affairs

A document sworn under oath, completed by a bankrupt, company officer or director(s), stating the assets and giving details of debts and creditors.

Supervisor

An IP appointed to supervise the carrying out of a company voluntary arrangement.

UNCITRAL

United Nations Commission on International Trade Law.

Unsecured Creditor

A creditor who does not hold security (such as a mortgage) for money owed. Some unsecured creditors may also be preferential creditors.

Voluntary Liquidation

A method of liquidation not involving the courts or the Official Receiver. There are 2 types of voluntary liquidation - members' voluntary liquidation for solvent companies and creditors' voluntary liquidation for insolvent companies.

Winding up Order

Order of a court, usually based on a creditor's petition, for the compulsory winding up or liquidation of a company or partnership.